Special Assessments in HOA Communities
There are many reasons why an Association may choose to pass a Special Assessment. Upon the need to do so, it is imperative that the Association follow the proper steps in imposing a Special Assessment. Please note the following recommendations in considering a Special Assessment:
Review of the Association’s Governing Documents: This is the first step in the process. The governing documents will outline the requirements that need to be followed when proposing and voting on a Special Assessment.
Holding a Special Meeting to Vote on the Special Assessment: Most governing documents require a homeowner vote for a Special Assessment. If a meeting is required, we recommend that a strong notice explaining the reason for the Special Assessment as well as a Directed Proxy be mailed to all Owners of Record. It is important to review the meeting notice requirements, mailing timeframes and quorum requirements and to preserve all Directed Proxies received from Owners as well as Certificates of Mailings, Sign In Sheets, Minutes and other meeting records. Many Associations choose to have legal counsel draft the notice and Directed Proxy to ensure that all requirements are met.
Drafting a Resolution Regarding the Special Assessment: A Resolution outlines the terms of the Special Assessment. Specifically, it should list the reason for the Special Assessment, the total amount of the Special Assessment, the payment amount and terms and how the Special Assessment will be handled in case of a sale or refinance of an unit. The Resolution will then be mailed to all Owners of Record so that each Owner has the specific details regarding the Special Assessment. Please ensure to reach out to the Association’s legal counsel for help in drafting this resolution as this is a very important document for both the Association and Owners alike.
Loss Assessment Insurance: All Owners should be informed to purchase Loss Assessment Insurance. This is a very affordable policy that each Owner can purchase to cover any Special Assessments that an Association may pass for an insurable loss. An example of this may be for a hail claim that the Association would file and a Special Assessment would be passed for the deductible associated with the claim. If Owners have Loss Assessment Insurance, they can then file a claim for the Special Assessment covering the deductible and hopefully have no out of pocket expenses for the Special Assessment. It is recommended that Owners obtain up to $15,000 in Loss Assessment Insurance.
THIS IS NOT LEGAL ADVICE. FOR INFORMATIONAL PURPOSES ONLY.
Do you have questions about this article or any other HOA question?
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